According to National Taxpayer Advocate Erin Collins, excessive delays in processing tax returns and tax refunds are the No. 1 most serious problem facing taxpayers. Annual Report to Congress Issued today. It was tough last year, and it looks like it’s going to be tough this year as well.
The Internal Revenue Service announced this week that the start date for filing the 2022 tax season—when you file your 2021 tax return—is Monday, January 24. Meanwhile, lakhs of people are still waiting for their 2020 tax year tax refund. And taxpayer advocate is warning of delays in refunds this tax season.
“I am deeply concerned about the upcoming filing season. The paper is the IRS’s kryptonite, and the agency is still mired in it,” Collins said. How bad was last year? Taxpayers faced long delays in processing and refunds, difficulty reaching the IRS by phone, correspondence that remained unprocessed for several months, collection notices issued while the taxpayer waited for correspondence processing, limited or no Where is the information? Tools for delayed returns, and the difficulty of getting timely help from Taxpayer Advocate Service, an independent organization within the IRS, which Collins heads. Last year, TAS received more than 66,000 congressional referrals, which was six times the pre-pandemic level of inquiries.
Millions of e-filed returns were withheld because of math error notices issued by the IRS due to discrepancies related to 2020 tax year stimulus payments. The most common error (11 million returns) was around recovery rebate credit claims by taxpayers who did not receive stimulus payments. The mismatch triggers the math error notice; Taxpayers’ responses go in piles of paper; And any refund gets delayed further. Paper returns were taking up to eight months to process, and there were cases where the revised returns took more than a year to process.
Collins warns that the millions of discrepancies—and math error notices—are likely to persist this year as well, as taxpayers get a third stimulus payment paid in 2021 as well as any 2021 monthly advanced child tax on their 2021 tax returns. Credit payments have to be reconciled. The Child Tax Credit payment applies to nearly everyone with children — 36 million taxpayers. To avoid tax refund delays, make sure you have IRS letters 6419 and 6475 with you before you file. File electronically and choose Direct Deposit.
How bad is the backlog going this filing season? The latest COVID operations figures as of January 7 show that the IRS still had 6 million unprocessed 2020 individual tax year returns as of December 23, 2021. In addition, as of January 1, there were 2.3 million unprocessed modified individual tax returns, and as of January 5, there were 2 million unprocessed employer’s quarterly tax returns (Forms 941 and 941-X).
According to a Taxpayer Advocate report, the IRS backlog includes nearly 5 million pieces of taxpayer correspondence—some of these submissions date back at least April and many taxpayers are still waiting for their refunds nine months later.
As of December 3, 2021, IRS filing data shows 168 million individual income tax returns processed. Of these, refunds were issued to 77 per cent. The average refund came in at $2,815.
Delay in tax refund with disproportionate impact on low-income taxpayers creates real problems for the people. “The financial impact can range from mild discomfort to severe financial hardship,” Collins says.
Collins says the IRS “deserves credit for playing the hand that was dealt.” Congress has accused the IRS of administering COVID-relief-stimulus payments, the Enhanced Child Tax Credit and the $10,200 unemployment benefit tax exclusion. And the number of taxpayers serving the IRS is increasing while IRS workforce numbers and budgets are shrinking. Since fiscal year 2010, the IRS’ workforce has decreased by 17%, while its workload — as measured by the number of individual return filings — has increased by 19%.
How can Congress help? Taxpayer Advocate calls on Congress to increase its funding to the IRS to improve the taxpayer experience and modernize its IT systems.
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got kids? IRS Child Tax Credit Letter 6419. look for
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